Question 11:

The Payback Period is widely used as a metric for deciding on whether to take a project. However, it has a number of significantproblems.

What is one of thedownsidesof using the payback period?

A - It leaks motor oil, so you have to continually clean your driveway.

B - It ignores potentially large cashflows which occur later in the projects life.

C - It only comes in unattractive shades of blue and off-white

D - It requires applying a discount rate, which is difficult to estimate.

Question 12:

You have a project which requires an immediate, up-front investment of $2,563. In3 years(the end of year 3), the project will pay off $4,543. What is the annual internal rate of return (IRR) of this project?

Question 13:

You invest $1,300 in a security that makes a final payout in 8 years with no intermediate payments.

What is the expected final payoff from this security at the end of 8 years is if has an expected annual return of 3.9%.